91Ó°ÊÓ

(Horizontal and Vertical Analysis) Presented below is the comparative balance sheet for Gilmour Company.

GILMOUR COMPANY COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2018 AND 2017
December 31
	2018	2017
Assets
Cash	\( 180,000	\) 275,000
Accounts receivable (net)	220,000	155,000
Short-term investments	270,000	150,000
Inventories	1,060,000	980,000
Prepaid expenses	25,000	25,000
Plant & equipment	2,585,000	1,950,000
Accumulated depreciation	(1,000,000)	(750,000)
	\(3,340,000	(2,785,000)
Liabilities and Stockholders’ Equity
Accounts payable	\) 50,000	\( 75,000
Accrued expenses	170,000	200,000
Bonds payable	450,000	190,000
Common stock	2,100,000	1,770,000
Retained earnings	570,000	550,000
	\)3,340,000	(2,785,000)

Instructions

(Round to two decimal places.)

1. Prepare a comparative balance sheet of Gilmour Company showing the percent each item is of the total assets or total liabilities and stockholders’ equity.

Step by step solution

01

Meaning of Horizontal Analysis

Horizontal analysis is a financial statement analysis approach that involves comparing financial data from one accounting period to data from a subsequent period. Investigators utilize this strategy to evaluate real-world patterns.

02

Preparing a comparative balance sheet of Gilmour Company showing the percent each item is of the total assets or total liabilities and stockholders’ equity

GILMOUR COMPANY Comparative Balance Sheet December 31, 2018, and 2017
December 31
Asset 2018 2017
Cash	$180,000	5.39%	$ 275,000	9.87%
Accounts receivable (net	220,000	6.59	155,000	5.57
Short-term Investments	270,000	8.08	150,000	5.39
Inventories	1,060,000	31.74	980,000	35.18
Prepaid expenses	25,000	0.75	25,000	0.902
Plant and equipment	2,585,000	77.39	1,950,000	70.02
Accumulated depreciation	(1,000,000)	(29.94)	(750,000)	(26.93)
Total	$3,340,000	100.00%	$2,785,000	100.00%
Liabilities and Stockholders’ Equity
Accounts payable	$ 50,000	1.50%	$ 75,000	2.69%
Accrued expenses	170,000	5.09	200,000	7.18
Bonds payable	450,000	13.47	190,000	6.82
Common stock	2,100,000	62.87	1,770,000	63.56
Retained earnings	570,000	17.07	550,000	19.75
Total	$3,340,000	100.00%	$2,785,000	100.00%

Working note:

All the percentage values should be determined by using the formula as follows:

$\mathrm{Percentage}\mathrm{value}=\frac{\mathrm{Asset}\mathrm{or}\mathrm{liability}}{\mathrm{Total}\mathrm{asset}\mathrm{or}\mathrm{total}\mathrm{liability}}$

Like to find Cash percentage use:

$\begin{array}{rcl}\mathrm{Cash}\mathrm{value}\mathrm{percentage}\mathrm{of}2018& =& \frac{\mathrm{Cash}}{\mathrm{Total}\mathrm{assets}}\\ & =& \frac{\$180,000}{\$3,340,000}\\ & =& 5.39\%\end{array}$

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